New Minnesota Tax Code Results in Missed Tax Breaks

Published On: 14th October 2013

From the internet

The State of Minnesota has decided not to conform to the federal tax code. Because of this, some employer tax benefits and other tax breaks that are typically enjoyed in other states will not be seen in Minnesota.

The American Taxpayer Relief Act of 2012 provided many provisions within federal tax law that allows certain income items to be exempt from taxes, such as educational benefits provided by employers, transit benefits, and adoption assistance.

However, Minnesota’s 2013 omnibus tax bill does not require the State of Minnesota to conform to the relief act for the 2013 tax year and beyond. This has resulted in Minnesota also removing some of the federal tax breaks.

The tax breaks that Minnesotans will not be able to take advantage of for the 2013 tax year includes mortgage insurance premiums, childcare credits, student loan interest payments, and similar breaks.

The Pioneer Press reported that Minnesota had matched most of the federal tax law changes for the past 2 ½ decades, but the recent budget shortfalls has a lot to do with why it isn’t now. State lawmakers come to the conclusion that conforming to all of the federal tax law changes would cost Minnesota too much money. The Minnesota Department of Revenue calculated that the cost would be $300 million over two years.

It is projected that approximately 12,000 Minnesotans will pay up to $300 more in Minnesota state income tax because of not conforming with the federal tax law.

It was proposed by one legislator to pay for the revenue shortage by adjusting the state income tax brackets, but she could not get her proposal past the Senate or the Governor.

Attorneys have said that not conforming to federal tax codes has created a hassle for employers and consumers. Those that offer tuition and adoption assistance may have to take the taxes out of the paychecks of their employees in a lump sum at the end of 2013.

Payroll systems are already rather complex, so this results in them having to be reprogrammed. They become even more complex when the federal tax rules and the state tax rules differ from one another. There is a lot of time and effort that is involved with making sure everything is carried out correctly. This also results in extra man hours needed by businesses and payroll companies to hash out the changes that are taking place.